Press Release

December 10, 2018

Contact: Richard Loconte, 212-709-1691


Emergency Regulation Affirms the Superintendent’s Authority to Require Life Insurers to Change an Assumption or Method and Adjust Reserves as Necessary to Protect New York Policyholders under New York Insurance Law

Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has promulgated an emergency regulation to begin the implementation of principle-based reserving (PBR) to become effective on January 1, 2020.  The emergency regulation follows the signing of enabling legislation by Governor Andrew M. Cuomo and is also issued pursuant to Sections 102, 201, 202, 301 and 302 of the Financial Services Law and Sections 301, 4217, and 4517 of the Insurance Law. PBR is a valuation model designed to allow insurance companies to hold reserves based on credible experience that is tailored to the companies’ particular products, within the strict guidelines that will be set by DFS for New York.  The emergency regulation adopted today affirms the Superintendent’s statutory authority to deviate from the National Association of Commissioners (NAIC) Valuation Manual – following adoption – to adjust reserves, if necessary, in order to protect New York policyholders and the state’s life insurance industry.

“PBR, as now implemented by DFS, modernizes New York’s life insurance market while ensuring that insurance companies domiciled and licensed in New York are fiscally strong and hold the reserves necessary to meet their contractual obligations to pay claims to beneficiaries of life insurance policies over the long term,” said Superintendent Vullo. “This emergency regulation re-affirms DFS’s ability under New York’s Insurance Law to adjust an insurance company’s reserves as necessary to protect policyholders, consistently with the NAIC Model Law.  I have been pleased to work with all stakeholders, including New York’s life insurance industry, on this legislation and accompanying regulation, to ensure that New York remains at the forefront of insurance regulation and that DFS continues to have the necessary flexibility to make certain that reserves to back insurance policies are appropriately set and adjusted by DFS as necessary to protect consumers and safeguard the industry.”

Superintendent Vullo announced in July 2016 that DFS intended to adopt PBR for its regulated life insurers, immediately convened a working group consisting of six domestic life insurers and consumer representatives with deep roots in New York, representing the business and geographic diversity of the state.  DFS worked on legislation over the past two legislative sessions to bring New York in alignment with PBR as a national standard subject to NAIC accreditation requirements, while maintaining New York’s leadership in ensuring robust reserves to protect policyholders.

Over the past decade, the NAIC has worked with regulators and life insurance companies to develop an alternative life insurer reserve approach that replaces reserving formulas with a set of principles that allow an insurer to reflect its own unique experience and risks in calculating reserves.  DFS has now joined with insurance regulators nationwide in agreeing that PBR better captures the risks of many complex life insurance and annuity products offered by insurers today and leads to appropriate reserves for specific categories of policies and insurers.

New York has a long history of robust solvency safeguards, protecting consumers and leading in insurance regulation.